The scale of the rot is something to behold. Something is grossly, wantonly wrong with Western Civilization, and lots of people know it, but they don’t know why (and for the next blind rebellion, see, “Occupy”).
But a head of the hydra popped into view last week. First a high profile whistleblower from Goldman Sachs wrote Why I am leaving in the New York Times. Then today (possibly, it’s unconfirmed), an insider from JP Morgan came forward to reveal something far worse, and dark to the core. It’s posted on the CFTC site (that’s The US Commodity Futures Trading Commission – the market watchdog, or rather watch-puppy). [UPDATE: The CFTC have removed the page after 48 hours, a copy of the text is here, screenshot here.]
A Goldman Sachs Executive Director — Greg Smith — resigned from the 143 year old firm explaining he felt ill with the callous culture where people would boast about how much they had ripped off clients, which they called “hunting elephants”, and calling their clients “muppets” and worse. He said that in 12 years the company had completely lost the culture that made him proud to join it. There was nothing left of integrity or humility. He was not alleging outright fraud, but something that sounds more like the company has been taken over by white collar psychopaths. These were people who cheered when someone sold a lemon to a client.
The anonymous whistleblower, allegedly from JP Morgan, was apparently inspired to pop up and describe something that really was market manipulation and fraud on a huge scale, everything from hiding assets from MF Global clients, to attempts to manipulate LIBOR (which affects the price of all derivatives). He or she claims JP Morgan is manipulating the gold and silver price: ” We have a little over a 25% (give or take a percentage) position in the short market for silver futures “.
“… this most recent crash in gold and silver during Bernanke’s speech on February 29th is of notable importance, as we along with 4 other major institutions, orchestrated the violent $100 drop in Gold and subsequent drops in silver.”
Why should you care about esoteric precious metals markets? It’s your currency, even if you don’t own any.
It’s like this. The governments and their central banks make as much free money from thin-air through fractional reserve banking and other methods as they can get away with — it benefits those who “spend that new money first”. They spend it at current prices, and pay it back later, after inflation has decreased its value. The people who pay the difference are those who saved and held money while its purchasing power fell. Speculators grow rich, while retirees and savers get poorer.
In a free market this would quickly lead to inflation, and people would rush to the only currencies the government can’t inflate (or “print” for free) — they’d buy and hold gold or silver and keep their purchasing power. Remember, gold and silver are the currencies that evolved in the marketplace over the last 5,000 years and are not directly under the control of government. (And “so?” you say?). The point is, if the prices of gold and silver rise fast, people would abandon bonds and get into metals instead, thus correcting the situation by making the printing and speculating game vastly less attractive while saving and production became more attractive. Essentially, people dump the government money and go for the competitor, which means the government (and or Fed) has to increase the interest rate and pay more for its money, and nobody wants that: God forbid that Governments or Banks should pay people a fair rate for borrowing “their” money.
Bonds and “treasuries” (US Treasury Bonds) are fancy words for loans to the government. But if no one wants to buy them, then the government has trouble raising funds for its massive pork barreling vote-buying schemes, and the investment bankers pay higher interest payments which takes all the fun out of Grossly Huge and Obscene Mergers, the SubPrime Parties and the High Frequency Festivals.
As Mrs T. said, “The problem with socialism is that eventually you run out of other people’s money“.
If the gold and silver markets are free, the bankers and government are much less able to join in cahoots to get more than their fair share off the people, because their government paper currencies suffer competition from gold and silver. The proverbial pot of gold sits at the end of the Fiddled-Gold-Market-Rainbow. If they can whip-saw the gold and silver market, and keep people from getting too much joy there, they can keep interest rates lower, surreptitiously transfer purchasing power from the public to the money printers, and fool the public into thinking that inflation really was only 3% — even as stocks hit record highs, executive salaries grew malignantly, and houses became unaffordable.
So right now a Nova-critic or two will be frothing-in-excitement: “Conspiracy theorist!”. To which I say “Deny this”:
- a/ the official Money base growth, shows that two thirds of the money base is money that didn’t exist in August 2008. ECB growth is large too.
- b/ That CFTC data shows four US banks hold 22% of all the silver shorts and 30% of all the gold shorts. One class action lawsuit claims that HSBC and JPMorgan control as much as 85% of the silver shorts.
Note that the big banks – who are supposed to be trying to make money on markets, and ought to have some ability to predict the price — have been systematically predicting (through their excessive short positions) that gold and silver would fall in price, ever since gold was $300 an ounce, and silver was $5. In other words, those big banks have been repeatedly, reliably, and excessively “wrong” in their predictions on the gold and silver market for a decade. Hands up all those who think those banks are trying to make money from speculating on the gold and silver contracts? Hands up those who think the banks are trying to make money from everything else they do, by keeping the prices of gold and silver down? Hands up who wonders why the CFTC can’t spot obvious market manipulation? The government didn’t have to ask the bankers to fiddle the market, they just needed to turn a blind eye to a practice that suited their big-spending habits.
Fixing the market doesn’t mean having precise control, but if you and your mates hold a large slab of the market, it only takes a bit of forward planning in a cafe to set dates for big dumps. The sudden collapses wipe out the little people. In a futures market, margins can vanish in an hour, and they are wiped out for good. The futures market is so phenomenally large, that the spot price of real gold and silver is strongly influenced by the paper futures market (in these markets the derivatives tail wags the physical dog). The less scrupulous only need to do this a few times a year to keep those markets subdued.
Corruption is endemic. It’s due to the amount of money-for-nothing pumped into sovereign currencies.
Gold is an anti-cheating device. So is silver. You have to earn before you can spend it; governments and banks cannot create it at the click of a keyboard. That’s why the reports of widespread manipulation matter to every citizen, not just to investors. Gold represents the natural limits to growth, it’s the pin the pops the Ponzi bubble.
“Free” money allows the psychopaths to rise to the top, it rewards the most brazen, fearless, and unscrupulous behavior. Honest players on a slow-and-steady realistic schedule get eclipsed by competitors that push the limits of the system.
This week we’ve seen two whistleblowers emerge. The second anonymous one called for more.
I call all honest and courageous JPMorgan employees to step up and fight the cronyism and wide-scale manipulation by reporting the truth. …Our deepest secrets lie within the hands of honest employees and can be revealed through honest regulators that are willing to take a look inside one of America’s best kept secrets. Please do not allow this to turn into another Enron.
“Money-for-nothing” corrupts everything
If you wonder how corruption in climate science could be connected, look no further than Climate Money. Without the printing presses running flat out at the Fed, which politicians would have had the luxury of glorious schemes to control the weather? How could they hand out grants to send, say, aquariums on tour to warn of impending storms? Underneath it all, if large financial institutions were not looking forward to a brand-spanking-new $2 Trillion market to trade carbon, who would have found millions to install 70 foot Carbon-Clocks, 50 page science reports and to donate and push into “green” education campaigns? Funny money makes for funny decisions. Shame no one is laughing.
If real people had to earn real money, investment bankers would need to make real decisions, scientists would have to find real evidence, and politicians would have to come up with real reasons.